The overall cash market took a cue from the exuberant futures market and on average posted close to an 8-cent gain Thursday. The Midwest and California markets were strong as were some eastern points.
The Energy Information Administration (EIA) reported a build of 80 Bcf in its weekly storage report, slightly above expectations, and shortly after the number was released prices slipped to just above unchanged. Later in the session traders had a change of heart and bid contracts to solid gains. November added 8.2 cents to $3.297 and December gained 8.7 cents to $3.575. November crude oil added $1.87 to $91.85.
Eastern traders reported significant bidweek interest in index pricing. "A lot of it depends on your feel for the market and what you think the demand situation will be," said a Houston-based marketer following northeast pipes. "We feel that prices are going up, so we locked as much of the index gas we needed to buy for our retail obligations. We could have index gas available should spot prices rise throughout the month bought, but we did not overbuy."
He said he did not take a position, but he serviced retail customers and "demand was likely to be lower at the beginning of the month rather than the end of the month" thus potentially freeing volumes to offer to a presumably higher spot market.
Eastern spot markets improved Thursday. Quotes on Transco Zone 6 New York rose 3 cents to average $3.10, and Tetco M-3 was unchanged at $3.10 as well. Deliveries to Dominion added 8 cents to $3.02.
Prices were flat to slightly higher at Northeast points. Algonquin Citygate was quoted at an average $3.18, unchanged, and deliveries to Iroquois Waddington gained 5 cents to $3.33. Gas into Tennessee Zone 6 200 L was up a penny at $3.24.
A handful of points in the Midwest posted double-digit gains, yet forecasters expected only cool, seasonal temperatures. Tom Skilling, a meteorologist with the Chicago Weather Center, said Thursday evening would be clear and cool with periods of calm at night. Forecast lows were 40 degrees inland and low 50s at Chicago lakeshore. That was expected to transition to Friday's high of 69 with lighter northeast winds. The normal high at this time of year in Chicago is 71, according to AccuWeather.com.
Next-day gas at Chicago Citygate surged 12 cents to an average $3.11, and deliveries to Consumers jumped 6 cents to $3.11 as well. Parcels on Michcon were reported 10 cents higher at $3.12, and Friday gas on Alliance was 11 cents higher at $3.09.
West Coast points made healthy advances. Malin came in 7 cents higher to average $2.96, and PG&E Citygates traded up 13 cents to $3.61. SoCal Citygates rose a nickel to $3.37, and SoCal Border quotes gained 5 cents to $3.26. Deliveries to El Paso S Mainline added 5 cents as well to $3.26.
Futures traders called the day's action "supportive. I like where it closed," said a New York floor trader. "I'm thinking we will get an extension to the mid $3.30s and see how it reacts against that."
The EIA inventory report allowed traders to put some finishing touches on their estimates for ending storage going into the winter heating season. Back in March, when the year-on-five-year storage surplus was a humongous 900-plus Bcf, there were concerns that there wouldn't be enough storage capacity for all the production rolling out of the Marcellus Shale and elsewhere.
Storage currently stands at 3,576 Bcf, and the EIA estimates that total available storage at 4,247 so with five weeks left in the traditional injection season, only 75 Bcf per week of injections are necessary to bring storage up to 3,950 Bcf, just short of last year's record 3,954 Bcf. To get to 4,247 Bcf, a whopping 135 Bcf would need to be injected each week. That probably won't happen.
John Sodergreen, publisher of Energy Metro Desk (EMD) in his weekly storage survey of energy professionals said, "We expect the market to fare well this week as well; a trend we can get used to." That probably means the EMD survey will be close to actual figures, but it's not entirely clear. "Last week, the EIA came in a couple points higher than the consensus [27 Bcf versus 25 Bcf], but it wasn't unexpected. This week the range is a bit wider; the standard deviation a bit higher, and from what we can tell, nobody is really betting the farm on the report this week. We've heard good reasonable support for upside and downside risk; the editor this week is actually lower than consensus by a few points. Either way, market reaction should be fairly muted."
The EMD survey of 38 traders and analysts revealed an average 76 Bcf, and the editor estimated 72 Bcf. A Reuters survey of 30 traders showed an average 76 Bcf also with a range of 69-83 Bcf. Jim Ritterbusch of Ritterbusch and Associates was looking for a build of 82 Bcf, as was Bentek Energy. Last year, a plump 104 Bcf was injected, and the five-year average stands at 76 Bcf.
Futures traders are skeptical prices can continue much higher. They said Wednesday they did not see the 11-cent November rally as having any staying power. "I think it's going to be short-lived. I could see November trading up to the $3.25-3.30 area, but I don't think we will get much higher than $3.30 in November," said a New York floor trader. "All the last two days has been is short-covering. Any lack of weather and this market is sayonara."
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